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Be a good sport

Running an operation is a lot like football


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Operating a multi-unit chain is similar to being a football coach.

The team’s owner and the general manager are responsible for the organization of the club and supply the coach with players. The coach strives to get the most out of the players he is given. Not everyone of the team is an all-star. Some are injured. The coach is then forced to use backup players who may or may not be adequately trained and skilled. Even when the starter is out on the field, he can have a bad day. Conditions on the field may not be ideal. Rain and snow can make the field nearly unplayable. Through all the adversity, the coach is still supposed to guide his team to victory every week.

 

Gene Baldwin is a partner
in CRG Partners Group, LLC,
a national turnaround consultancy that brings new life to distressed companies through operational and financial restructuring.

Gene can be reached at 316-371-2908 or at gene.baldwin@crgpartners.com


A multi-unit operator has many of the same challenges. Customers must be served in a consistently excellent way every day. Hourly employees are notorious for being no-shows. Adverse weather can affect sales and profitability. The building and equipment may need repairs. The owner or senior management may not provide the resources necessary to attract the best people and when the operator does develop an all-star, the competition is there to make that manager or staff member a better offer.

One of the best traits of a good operator (or football coach) is an attitude about business that is biased toward action. They cannot afford paralysis by analysis. I recently encountered two situations where companies were damaged by procrastination.

The first situation involved a small department store chain managed by the third generation of ownership. The CEO was intelligent but was trained as an attorney and he did not grow up in the business. After several years of turnover in senior operating management and declining sales, the business desperately needed to be refinanced or sold. Term sheets came forward from lenders and investors. The provisions of those offers were never quite good enough for the CEO. He did not recognize that continued loss of liquidity was jeopardizing the viability of the organization. This CEO managed by analysis, negotiation and procrastination. I am convinced that a good operator would have recognized the precarious nature of company’s financial situation and would have made a less-than-perfect financing arrangement to save the company. The result of the CEO’s inaction was a loss of confidence by its vendor community that eventually stopped shipping product. You cannot hide from your vendors. They know your financial condition by the level of product they are shipping you compared to historic standards. If your purchases are down, sales and profits must be down, too. Also, regardless of what they say, vendors talk and compare notes about the financial condition of their customers. Once vendors stopped shipping, the going-out-of-business signs came out quickly.

The second situation involved a small retailer that expanded too fast and was forced to close stores and retrench operations. Here again, the CEO was not a skilled operator with a bias towards action. It took him longer than necessary to recognize the seriousness of the situation and take the direct and immediate action to close stores, terminate unneeded employees and liquidate excess inventory. Even when the retrenching actions started they were not executed quickly and decisively. His delay cost the company thousands of dollars and only postponed a positive move forward to greater profitability.

The lesson of these two stories is that operators must gather all the information necessary to make the right decision and then they must act quickly based on that information. Once the decision is made, the operator must be committed to his or her chosen course of action. I sometimes think it would be good if business leaders had a 30-second clock like they do in football. If there were such a clock, I think better and timelier business decisions would be made.

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